REG - Touchstar PLC - Final Results
18/04/2023 07:00
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RNS Number : 4947W Touchstar PLC 18 April 2023
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
Touchstar plc
Final Results for the year ended 31 December 2022
Strong results for the year, net cash up 46% and encouraging outlook for 2023
The Board of Touchstar plc ((AIM: TST) "Touchstar", the "Company" or the
"Group"), suppliers of mobile data computing solutions and managed services to
a variety of industrial sectors, is pleased to announce its final results for
the twelve months ended 31 December 2022 ("FY22" and "Period").
Key financials
2022 2021 % increase
Revenue £6,743,000 £6,104,000 up 10.5%
Margin 61.7% 59.5% Up 220bps
EBITDA £1,334,000 £1,072,000 up 24.4%
Profit after tax £558,000 £341,000 up 63.6%
Earnings per share ("EPS") 6.58p 4.02p Up 63.7%
Net cash £3,476,000 £2,380,000 up 46.1%
Order book at year end £1,700,000 £600,000 up 183.3%
Recurring revenue £2,688,000 £2,322,000 up 15.8%
FY22 financial highlights
· Total revenue up 10.5% to £6,743,000 (2021: £6,104,000)
o Recurring revenue growth continues to outpace growth in overall revenue up
15.8% to £2,688,000 (2021: £2,322,000)
o Recurring revenue accounted for 39.9% of total revenue (2021: 38.0%)
· Margins improve 220 basis points in 2022 to 61.7% (2021: 59.5%)
· Growth in revenue and higher margins enhanced profitability.
o After tax profit growth of 63.6% to £558,000 (2021: £341,000)
o Profits before tax up 103.9% to £422,000 (2021: £207,000)
o EPS rose by 63.7% to 6.58p (2021: 4.02p)
o EBITDA increased of 24.4% to £1,334,000 (2021: £1,072,000)
o Strong free cash generation of £1,096,000 in 2022 (2021: £609,000)
o Net cash of £3,476,000 at year end 2022 (2021: £2,380,000)
o Cash per share of 41p at year end (2021: 28p)
· New order intake continued to build throughout 2022, the order
book ended the year end up 183.3% at £1,700,000 (2021: £600,000)
Outlook and strategic progress
o Attention of the business is to continue the delivery of excellent
service to our customers.
o The buoyant level of the year end order book and trading momentum
underpins the prospects for 2023.
o Strong momentum for another year of improved financial performance.
o Further growth in total revenue.
o Recurring revenue that is over 39.9% of total revenue.
o Maintained healthy margins and net cash generation.
o Accelerating investment in the long-term organic growth potential of the
business creating a platform for expansion and further sustainable growth.
o Enter new territories through leveraging existing customer relationships.
o Commence strategy to create an international distribution channel of our
products and services through development of local relationships and
distribution partnerships.
o Opportunities are being identified to enhance our products and enter new
markets by potential bolt-on acquisitions.
o Once capital reduction process is approved by the courts, which we expect
to take place during the course of 2023, it is the Board's current intention
to increase shareholder value by using excess cash by way of the introduction
of a dividend and via a share buyback programme.
Commenting today, Ian Martin, Chairman of Touchstar, said: "2022 was a year of
strong progress for Touchstar. The outlook for 2023 is very positive. We have
a growth strategy, an experienced and well-motivated leadership team excited
by the potential to continue to grow across the Group. Deploying organically
generated capital into highly attractive opportunities in our existing markets
and starting to roll out a growth strategy internationally".
For further information, please contact:
Touchstar plc Ian Martin/ Mark Hardy 0161 874 5050
WH Ireland - Nominated adviser and broker Mike Coe/ Sarah Mather 0207 220 1666
Information on Touchstar plc can be seen at: www.touchstarplc.com
(http://www.touchstarplc.com/)
CHAIRMANS STATEMENT
Overview
It was a good year for Touchstar, and another strong performance was delivered
in FY22. It is testament to our focus on the fundamentals of great customer
service, expert delivery, forward thinking product development and proactive
management that we not only achieved a positive financial outcome but built
upon our forward momentum.
The order book at year end stood at £1,700,000 which gives us a solid
starting position to 2023. In our largest market of petrochemical distribution
there continues to be favourable market conditions and robust demand which is
encouraging. In Q4 of 2022 alone we took in £2.4m of new orders across our
businesses.
We continue to invest in our products and technology capabilities to enable us
to serve our customers as best we can - it is our reputation for service,
market expertise and our deep relationship with our customers that is the
foundation of the business to date, it is these assets that now offer an
opportunity for growth into international markets. To succeed we must continue
to have a willingness to innovate, continually evolve, and have the ambition
to create a sustainable larger business.
Business review
FY22 was a year of solid underlying performance in many ways, but in
particular the growth in both turnover and profit is as a result of the
investments made in the product set over the last few years. Our product
portfolio is developing and moving ahead with rich functionality, allowing us
to secure new business whilst maintaining our existing client base
effectively.
We successfully launched and deployed the latest robust android based mobile
tablet for the key market area in which we operate. The enhancements are
predominantly in speed performance of the device and improved connectivity
options. Whilst the hardware element of our product set is important, it is
no longer the dominant force in our product offering. The success of the
cloud-based software applications we have developed has reduced our reliance
on the hardware side of the business. We are now a complete solutions
business, differentiating us from many of our competitors. Improved margin
and increased recurring revenue is an exact result of the introduction of
complete solution sales. Total recurring revenue grew by 15.8% in FY22,
including the software licence revenue element which achieved 30.9% growth
year on year.
The strength of our strong product set has resulted in a growing and healthy
order bank during FY22 and this continues into 2023. This provides us with a
strong confidence level for the business going forward, as it allows us to
securely move forward with expansion plans to continue the sales growth and
achievements of the last three years.
With the level of cash we have and with cash generation also becoming more
predictable, we are now accelerating investment in the long-term organic
growth potential of the business by seeking to:
· increase sales through increased innovation of our products and
solutions;
· expand into new territories through development of local
relationships and partnerships;
· put in place the skills and structure to tender for larger,
complex contracts; and
· enter into new vertical sectors by adaption of existing products
and solutions
In particular, we are concentrating efforts on overseas sales and are
confident this will start to bear fruit in 2023. We have selected a number
of European countries and have engaged with the British consulate in two
countries already. To date this is showing positive signs of success. The
Group is now in a stronger position to undertake non-organic growth too, and
an acquisition of either a product set or a company in the relevant fields we
specialise in will be considered strategically.
Financial results
2022 2021 % Change
Revenue £6,743,000 £6,104,000 +10.5%
Gross margin 61.7% 59.5% +220 basis points
Pre-tax profit £422,000 £207,000 +103.9%
Post tax profit £558,000 £341,000 +63.6%
Earnings per share (EPS) 6.58p 4.02p +63.7%
Revenue grew 10.5% in FY22 to £6,743,000, much of this growth was came from
the successfully securing major project contracts in the petrochemical
distribution sector, which, as we expected, returned to normalised levels in
FY22.
An increased percentage of software sales continued to drive progression in
gross margins which rose a further 220 basis points in FY22 to 61.7%.
Costs rose to £3,722,000 in FY22 (2021: £3,449,000) which reflects a general
inflationary pressure on costs within the business. Through effective
management the increase in costs of 6.7% was lower than the growth rate of
10.5% in revenue, so the business achieved productivity gain in FY22.
Growth in revenue, tight control of costs and higher margins resulted in
improved financial returns with pre-tax profits up by 103.9% to £422,000. A
strategy of continued investment in the business meant we again benefitted
from a tax credit, which in FY22 totalled £136,000 (2021: £134,000). So, in
FY22 both earnings per share and profits after tax increased by about 64% to
6.58p and £558,000 respectively.
2022 2021 % Change
Recurring revenue £2,688,000 £2,322,000 +15.8%
Recurring revenue as % of total revenue 39.9% 38.0% +190 Basis Points
As we had anticipated recurring revenue growth outpaced the increase in total
revenue which enabled the Company to meet expectations of recurring revenue
moving to 40% of total revenues. This increases our quality of earnings and
makes for a more predictable outcome and underpins performance in future
years.
2022 2021 % Change
EBITDA £1,334,000 £1,072,000 +24.4%
Spend on Research & Development (R&D)* £1,029,000 £936,000 + 9.9%
R & D Capitalised £565,000 £461,000 +22.6%
(* inclusive of amounts capitalised)
EBITDA increased by 24.4% driven by improved profitability. Touchstar
continued to invest in the business with spend in R&D rising to
£1,029,000 which represents 15.3% of revenue (2021: 15.3%). Capitalisation
returned to more normalised levels following the pandemic.
2022 2021 Change
Net cash ** £3,476,000 £2,380,000 +£1,096,000 (+46.1%)
Free cash generation £1,096,000 £609,000 +£487,000 (+80.0%)
Cash per share 41p 28p +13p per share
(**Net cash is exclusive of the CIBLs balance in 2021 which was subsequently
fully repaid during FY22)
Cash generation continues to be strong with £1,096,000 of free cash generated
in FY22 including the full repayment of CIBLs in July 2022. This strengthened
further the balance sheet with net cash ending the year at £3,476,000,
equivalent to 41p per share.
The order book ended the year end at £1,700,000 (2021: £600,000) an increase
of 183.3% over the prior year. This reflects the normalisation of trading
across our markets, and buoyancy in the petrochemical distribution market in
particular.
Capital management
As we stated in our trading update in January with the level of cash and the
cash generation of the business becoming more predictable the Board feel it is
appropriate not only to invest in the long-term organic growth potential of
the business, but to also to consider bolt on acquisitions and develop a clear
route for the enhancing shareholder value.
To have the ability to consider increasing to returning value to shareholders,
either via share buybacks or the payment of dividends, company law requires
the Company to have positive distributable reserves. At present the Company
does not have positive distributable reserves due to the deficit on its
retained earning reserve which as of 31 December 2022 stood at £2,376,000
(2021: £2,696,000). The Directors are close to achieving a pathway to
eliminate this deficit through combining dividend payments from the Company's
underlying subsidiaries, profitable trading, and a capital reduction via a
court process.
It is hoped to be in a position to pay dividends and start a share buyback
programme in 2023.
The Board
It is with a sense of achievement that I have informed the Board of my
intention to step down as Chair during 2024, or earlier if a suitable
successor is found. An important job for a chair is knowing when to make a
transition, and to make sure it is seamless. The time is right for me, as I
know the business needs someone with a longer timeframe than mine to evolve
the business to the next level, and ensure it fully fore fills the potential
it has.
I am happy that the business is in such a good place, has excellent
management, is strongly capitalised, and has considerable growth opportunity.
Our people
I would like to thank all our colleagues for their outstanding collective
contribution not only in producing such a good performance in 2022, but also
for the part they have played in successfully navigating the challenges of the
past few years. The strong position the Company finds itself is not down to
chance, it is due to their focus, skills, hard work, conviction, and a culture
to keep doing the right thing.
Thank you - I have a deep fondness for what is developing into a special
business.
Current trading and outlook
The level of demand we are seeing combined with the level of the order book
going into 2023 underpins the confidence that the strong start to 2023 results
in another good year for the business.
Touchstar in in good shape with a customer service lead approach and a proven
cash generative business model. We have a clear focus, robust financial
position and ambition that supports our plans for long term sustainable
growth.
We remain positive in the long-term potential of our business.
I Martin
Chairman
17 April 2023
CEO STRATEGIC REVIEW
Turnover & profitability
The planned strategic change in the business direction over the past 3-5 years
is now evident, with a year-on-year steady improvement in profitability. The
real strength for the business is the hard evidence that new and more
profitable revenue streams are coming to the fore. The business turnover
grew at a healthy rate of 10.5% over FY21 (more than double the growth rate of
FY20 to FY21 of 3.7%). Cash generation also continues to remain healthy with
the Group's year-end net cash position at £3.5 million. The business made
£558,000 profit after tax, a 63.6% increase over the FY21 post tax profit of
£341,000. EBITDA grew by 24.4%, from £1,072,000 in FY21 to £1,334,000.
Turnover, EBITDA & PAT
2019* 2020 2021 2022
Group turnover £6,654,000 £5,886,000 £6,104,000 £6,743,000
EBITDA £85,000 £854,000 £1,072,000 £1,334,000
Profit after tax £(345,000) £87,000 £341,000 £558,000
(* continuing operations)
Recurring revenue
Recurring revenue is now the valuable asset we all envisaged, following our
strategic review in 2018. FY22 saw total recurring revenue increase by 15.8%
- a continuing and positive trend. This success is making a positive
impact into the performance and underlying value of the business. In FY22,
the Groups recurring revenue equated to 39.9% of turnover and the Board
envisage this percentage will continue increasing.
Group recurring revenue
2019 2020 2021 2022
Group recurring revenue by year £1,918,000 £2,037,000 £2,322,000 £2,688,000
% Increase year on year Up 4.2% up 6.2% up 14.0% up 15.8%
Software licence recurring revenue
Whilst the Group enjoyed an increase of 16% in total recurring revenue over
previous year, the predominant impact in growth of this type of profitable
revenue has come from software licence, a key strategic objective. Recurring
revenue in software licences grew a marked 30.9% over FY21 performance. This
key area of growth will continue to increase as the change in our business
strategy takes effect. As we alluded to in FY21, the growth line in software
licence revenue has now exceeded hardware recurring revenue and is expected to
grow further still in 2023 and beyond.
Group recurring revenue
2019 2020 2021 2022
Software licences £767,000 £863,000 £1,040,000 £1,361,000
Increase year on year Up 16.4% up 12.5% up 20.5% up 30.9%
Hardware maintenance £1,151,000 £1,174,000 £1,282,000 £1,327,000
Movement year on year down 2.5% Up 2.0% up 9.2% up 3.5%
All the complete solutions the Company now offers, consist of a majority of
inhouse owned software and hardware (Touchstar IPR) which eliminates our
reliance on third party suppliers and provides maximum flexibility in growing
the sales and profit line of the Group. This move has allowed us to increase
the sale of software development as customers require tweaks and modifications
to our standard products to suit their operation. The chart below
illustrates the increases in chargeable software development and support over
previous years.
Customer requested software developments
2019 2020 2021 2022
Customer requested software developments by year £128,600 £129,200 £257,900 £341,400
Increase year on year Up 53.5% up 0.5% up 99.6% up 32.4%
Gross margin
We continue to secure large contracts with blue chip companies across the
UK. The strategy to supply a SaaS (Software as a Service) model to the
industry is now widely accepted. This now provides consistent recurring
revenue greater than in previous years. Combining increases of recurring
revenue and the above software development charges continues to provide a
healthy gross margin for the Company, of 61.7% of the Group's turnover in FY22
(FY21: 59.5%).
The Group operates under the Touchstar brand providing consistent brand
awareness of the operating companies which has been successful in promoting a
cohesive and singular business and all can be accessed under one web site:
www.touchstar.co.uk (http://www.touchstar.co.uk) .
Shareholder value
The year-on-year improvements in the business has contributed significantly to
shareholder value as we continue this positive trend. EPS increased over 60%
from 4.02 pence to 6.58 pence in 2022. In a turbulent year of company
stock valuations, Touchstar share price has outperformed the market and sector
as a whole. The share price movement during the trading year of 2022
increased a modest 13.3% from 75 pence to 85 pence per share.
Consolidated income statement for the year ended 31 December 2022
2022 2021
£'000 £'000
Revenue 6,743 6,104
Cost of sales (2,583) (2,472)
Gross profit 4,160 3,632
Distribution costs (46) (49)
Administrative expenses (3,676) (3,400)
Other operating income - 44
Operating profit before share-based payment provision 490 233
Share-based payment provision included in administrative expenses (52) (6)
Operating profit 438 227
Finance costs (16) (20)
Profit before income tax 422 207
Income tax credit 136 134
Profit for the year attributable to the owners of the parent 558 341
Earnings per ordinary share (pence) attributable to owners of the parent
during the year:
2022 2021
Basic 6.58p 4.02p
There is no other comprehensive income or expense in the current year or prior
year and consequently no statement of other comprehensive income or expense
has been presented.
All activity in 2022 relating to continuing operations.
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 not to present the parent Company income statement. The
profit for the Company is detailed in the statement of financial position and
the Company statement of changes in shareholders' equity.
Consolidated statement of changes in equity for the year ended 31 December 2022
Share capital Share premium account Share based payment Reserves Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 1 January 2021 424 1,119 - 435 1,978
Profit for the year - - 6 341 347
At 31 December 2021 424 1,119 6 776 2,325
Cost of capital reduction in subsidiary - - - (2) (2)
Profit for the year - - 52 558 610
At 31 December 2022 424 1,119 58 1,332 2,933
Company statement of changes in equity for the year ended 31 December 2022
Share capital Share premium account Share based payment reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 1 January 2021 424 1,119 - (2,702) (1,159)
Profit for the year - - 6 6 12
At 31 December 2021 424 1,119 6 (2,696) (1,147)
Profit for the year - - 52 320 372
At 31 December 2022 424 1,119 58 (2,376) (775)
Consolidated and Company statements of financial position as at 31 December 2022
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Non-current assets
Intangible assets 1,087 1,198 - -
Investments - - 47 5
Property, plant and equipment EQUIPMENTEQUIPMENTEQUIPMENT 94 94 - -
EQUIPMENTequipment
Right-of-use assets 299 399 - -
Deferred tax assets 46 81 3 3
1,526 1,772 50 8
Current assets
Inventories 967 865 - -
Trade and other receivables 975 1,071 415 462
Corporation tax receivable 18 166 - -
Cash and cash equivalents 4,461 3,903 - -
6,421 6,005 415 462
Total assets 7,947 7,777 465 470
Current liabilities
Trade and other payables 1,491 1,333 255 94
Contract liabilities 2,022 1,762 - -
Borrowings 985 1,418 985 1,418
Lease liabilities 157 169 - -
4,655 4,682 1,240 1,512
Non-current liabilities
Deferred tax liabilities 80 251 - -
Contract liabilities 144 172 - -
Borrowings - 105 - 105
Lease liabilities 135 242 - -
359 770 - 105
Total liabilities 5,014 5,452 1,240 1,617
Consolidated and Company statement of financial position as at 31 December 2022 (continued)
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Capital and reserves attributable
to owners of the parent
Retained earnings at beginning of year 776 435 (2,696) (2,702)
Cost of capital reduction in subsidiary (2) - - -
Profit/(loss) for the year 558 341 320 6
Retained earnings at end of year 1,332 776 (2,376) (2,696)
Share capital 424 424 424 424
Share based payment reserve 58 6 58 6
Share premium 1,119 1,119 1,119 1,119
Total equity 2,933 2,325 (775) (1,147)
Total equity and liabilities 7,947 7,777 465 470
Consolidated and Company cash flow statement for the year ended 31 December 2022
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash flows from operating activities
Operating profit 438 226 (1) 1
Depreciation 218 233 - -
Amortisation 677 612 - -
Share-based payment provision 52 6 52 6
Movement in:
Inventories (102) (151) - -
Trade and other receivables 96 (60) 47 (80)
Trade and other payables and contract liabilities 390 358 160 (36)
Cash generated from/(used in) operations 1,769 1,224 258 (109)
Interest paid (16) (20) (4) (3)
Corporation tax received 148 97 - -
Net cash generated from operating activities 1,901 1,301 254 (112)
Cash flows from investing activities
Addition of intangible assets (565) (460) - -
Investment in subsidiaries - - (42) (5)
Purchase of property, plant and equipment (60) (50) - -
Net cash used in investing activities (625) (510) (42) (5)
Cash flows from financing activities
Repayment of business loan (135) (15) (135) (15)
Dividends from subsidiaries - - 326 -
Principal elements of lease payments (178) (182) - -
Net cash generated from financing activities (313) (197) 191 (15)
Net increase/(decrease) in cash and cash equivalents 961 594 403 (132)
Cash and cash equivalents at start of the year 2,515 1,921 (1,388) (1,256)
Cash and cash equivalents at end of the year 3,476 2,515 (985) (1,388)
1 General information
Touchstar plc (the 'Company') and its subsidiaries (together 'the Group')
design and build rugged mobile computing devices and develop software
solutions used in a wide variety of field-based delivery, logistics and
service applications. The Company is a public company limited by share capital
incorporated and domiciled in the United Kingdom. The Company has its listing
on the AIM. The address of its registered office is 1 George Square, Glasgow,
G2 1AL.
2 Basis of preparation
The final results for the year ended 31 December 2022 have been prepared in
accordance with the accounting policies set out in the annual report and the
accounts for the year ended 31 December 2021.
The Group Financial Statements have been prepared in accordance with the
International Financial Reporting Standards ('IFRS') as adopted by the
European Union, IFRS IC interpretations and the Companies Act 2006 applicable
to companies reporting under IFRSs and the AIM Rules for Companies. The Group
Financial Statements have been prepared under the historical cost convention.
While the financial information included in this final announcement has been
computed in accordance with IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The accounting policies used in
preparation of this final announcement have remained unchanged from those set
out in the Group's 2021 statutory financial statements other than those
described below. They are also consistent with those in the Group's
statutory financial statements for the year ended 31 December 2022 which have
yet to be published. The final results for the year ended 31 December 2022
were approved by the Board of Directors on 17 April 2023.
The financial information set out in this final announcement does not
constitute the Group's statutory financial statements for the year ended 31
December 2022 but is derived from those financial statements which were
approved by the Board of Directors on 17 April 2023. The Auditors have
reported on the Group's statutory financial statements and their report was
unqualified and (ii) did not contain a statement under section 498(2) or
498(3) Companies Act 2006. The statutory financial statements for the year
ended 31 December 2022 have not yet been delivered to the Registrar of
Companies and will be delivered following the Company's Annual General
Meeting.
The comparative figures are derived from the Group's statutory financial
statements for the year ended 31 December 2021 which carried an unqualified
audit report, did not contain a statement under section 498(2) or 498(3)
Companies Act 2006 and have been filed with the Registrar of Companies.
Going Concern
These financial statements have been prepared on a going concern basis, which
assumes that the Group will be able to meet its liabilities when they fall
due. As of 31 December 2022, the Group held unencumbered cash of £3,476,000
(2021: £2,515,000), after considering overdraft balances as presented in note
21. The Company fully repaid Coronavirus Business Interruption Loan in July
2022 as the management decided this funding was no longer required. The Group
still holds an undrawn £200,000 on demand overdraft facility as of 31
December 2022 (also £nil in April 2023).
The Touchstar management continues to demonstrate its ability to proactively
respond to both internal and external challenges it faces, non-more so than
those encountered over the past three years.
The directors remain confident in the business, the skillset employed in its
dedicated staff, solid product set and loyal customer base.
External global economic challenges continue to impact business during 2022,
nonetheless, Group sales increased on 2021 by over 10%, margins grew from
59.5% in 2021 to 61.7% in 2022 driven by richer margin sales and operational
efficiencies, along with tight control of costs, resulted in a profit after
tax of £558,000 (2021: £341,000).
The Group continues to benefit from a supportive bank who have provided the
borrowing facility since 2005. Group has reduced its reliance on the facility
provided by the bank and since the year end has placed £2,000,000 on deposit
thereby generating cash via interest receivable. In assessing the Company's
ability to continue as a going concern, the Board has reviewed the Group's
cash flow and profit forecasts removing completely reliance on any facilities.
The impact of potential risks and related sensitivities to the forecasts were
considered in assessing the likelihood of additional facilities being required
in the future.
The directors have at the time of approving the financial statements, a
reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future. Thus
they continue to adopt the going concern basis of accounting in preparing the
financial statements.
3 Critical accounting estimates and judgements
The Group and Company makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
(a) Development expenditure
The Group recognises costs incurred on development projects as an intangible
asset which satisfies the requirements of IAS 38. The calculation of the costs
incurred includes the percentage of time spent by certain employees on the
development project. The decision whether to capitalise and how to determine
the period of economic benefit of a development project requires an assessment
of the commercial viability of the project and the prospect of selling the
project to new or existing customers.
(b) Impairment of intangibles
Judgement is required in determining both the useful economic life of the
asset along with any impairment, notably intangible software development
costs. Useful economic life is based on the life expectancy of software
licences and recoverable amounts are based on a calculation of expected future
cash flows, which require assumptions and estimates of future performance to
be made. Cash flows are discounted to their present value using pre-tax
discount rates based on the Directors market assessment of risks specific to
the asset.
(c) Stock provisions
Judgement is required in relation to the appropriate provision to be made for
the write down of slow moving or obsolete inventory. Such provisions are made
based on the assessment of the Group's prospective sale of inventories and
their net realisable value, which are subject to estimation uncertainty.
(d) Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of
estimation and judgement. It is based on the lifetime expected credit loss,
grouped based on days overdue, and makes assumptions to allocate an overall
expected credit loss rate for each group. These assumptions include recent
sales experience, historical collection rates, the impact of the Coronavirus
(COVID-19) pandemic and forward-looking information that is available.
After due consideration of the assumptions detailed above, no credit loss
provision was considered necessary for the year ended 31 December 2022 (2021:
nil) (note 20).
4 Analysis of revenue
2022 2021
£'000 £'000
Recognised at a point in time 4,055 3,782
Recognised over time (recurring revenue) 2,688 2,322
6,743 6,104
5 Share-based employee remuneration
The Touchstar plc EMI Share Option Plan (Plan) was approved by the
shareholders at the Annual 2021 AGM on 23 June 2021. It is a share-based
payment scheme for employee remuneration which will be settled in equity.
The Plan is part of the remuneration package for Group employees as selected
by the Group's Remuneration Committee. Options under this Plan will vest if
performance conditions, are met pertaining to profit after tax and recurring
revenue growth as defined in the Plan.
Participants in this Plan must be employed until the end of the agreed vesting
period unless deemed as 'good employees' by the Group's Remuneration Committee
on leaving. Upon vesting, each option allows the holder to purchase each
allocated share at the market price determined at the grant date.
The number of options granted during the year and outstanding at 31 December
2022:
Group
2022 2021
Number Number
At 1 January 211,000 -
Granted during the year 211,000 211,000
At 31 December 422,000 211,000
The assessed fair value at grant date of options granted during the year ended
31 December 2022 was £0.30 per option (2021: £0.35). The fair value at grant
date is independently determined using the Black-Scholes model that takes into
account the exercise price, the term of the option, the impact of dilution
(where material), the share price at grant date and expected price volatility
of the underlying share, the risk-free interest rate for the term of the
option, and the annualised volatility of Touchstar plc's shares.
The model inputs for options granted during the year ended 31 December 2022
included:
Grant date 18 Nov 2021 18 Nov 2021 21 Sep 2022 21 Sep 2022
Vesting period ends Term A Term B Term A Term B
30 Jun 2023 30 Jun 2024 30 Jun 2024 30 Jun 2025
No of shares granted 105,500 105,500 105,500 105,500
Share price at date of grant £0.85 £0.85 £0.775 £0.775
Volatility 50% 50% 33% 33%
Risk-free rate 1% 1% 3.3% 3.3%
Exercise price at date of grant £0.85 £0.85 £0.775 £0.775
Exercise period ends 17 Nov 2031 17 Nov 2031 20 Sep 2032 20 Sep 2032
30 Jun 30 Jun 30 Jun 30 Jun
Weighted average remaining contractual life
6.06 years 6.06 years 6.15 years 6.15 years
The underlying expected price volatility was determined by reference to the
historical data of Touchstar plc shares over the past 12 months. No special
features inherent to the options granted were incorporated into measurements
of fair value.
In total, £52,000 (2021: £6,000) of employee remuneration expense (all of
which related to equity-settled share-based payment transactions) has been
included in the income statement and credited to the Share-based payment
reserve.
6.1 Income tax credit
2022 2021
£'000 £'000
Corporation tax
Current tax - (147)
Adjustments in respect of prior years - (5)
Deferred tax (136) 18
Total tax credit (136) (134)
Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable
profit for the year. This is the weighted average tax rate applicable for
the year.
1
6.2 Factors affecting the tax credit for the year
The tax credit for the year is same as (2021: same as) the standard rate of
corporation tax in the UK of 19% (2021: 19%). The differences are explained
below:
2022 2021
£'000 £'000
Profit before income tax 422 207
Multiplied by the standard rate of corporation tax in the UK of 19% (2020: 80 39
19%)
Effects of:
Items not deductible for tax purposes 12 2
Enhanced research and development deduction (225) (213)
Adjustments in respect of prior years - (5)
Losses surrendered through R&D tax credit - 46
Capital allowances claimed in year less than/(in excess of) depreciation
20 20
Previously unrecognised tax losses used to reduce current tax expense
5 (71)
48
Adjustment to deferred tax arising from changes in tax rate (28) 48
Total tax credit for the year (136) (134)
Factors affecting the future tax charge
Changes to the UK corporation tax rates were substantively enacted as part of
Finance Bill 2021 (on 2 February 2023). This included the maintaining of the
current corporation tax rate of 19%.
The budget also announced an increase in rate from 19% to 25% from April 2023.
Therefore, deferred taxes at the balance sheet date have been measured at the
enacted tax rate of 25%.
7 Earnings/(losses) per share
2022 2021
Basic 6.58p 4.02p
Diluted n/a n/a
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the year. The Group issued 211,000 (2021: 211,000) options with
an exercise price of 77.5p (2021: 85p) during the year. Given the exercise
price of these options, they are considered anti-dilutive and therefore no
diluted EPS is presented.
Reconciliations of the earnings and weighted average number of shares used in
the calculation are set out below:
2022 2021
Earnings Weighted average number of shares (in thousands) Earnings Weighted average number of shares (in thousands)
£'000 £'000
Basic EPS
Profit attributable to owners of the parent 558 8,475 341 8,475
Adjusted EPS
Earnings attributable to owners of the parent before share-based payment 610 8,475 347 8,475
provision
8 Intangible assets
Group
Goodwill Development expenditure Total
£'000 £'000 £'000
Cost
At 1 January 2021 8,591 3,301 11,892
Additions - 460 460
Disposal - (678) (678)
At 31 December 2021 8,591 3,083 11,674
Additions - 565 565
Disposal - (33) (33)
At 31 December 2022 8,591 3,615 12,206
Accumulated amortisation
At 1 January 2021 8,591 1,951 10,542
Amortisation charge - 612 612
Disposal - (678) (678)
At 31 December 2021 8,591 1,885 10,476
Amortisation charge - 677 677
Disposal - (34) (34)
At 31 December 2022 8,591 2,528 11,119
Net book value
At 31 December 2022 - 1,087 1,087
At 1 January 2021 - 1,350 1,350
At 31 December 2021 - 1,198 1,198
Disposal of goodwill relates to the dissolution of the three dormant
subsidiary undertakings during 2020.
Amortisation of £677,000 (2021: £612,000) is included within administrative
expenses in the income statement.
Development expenditure
The calculation of the costs incurred includes third party developers along
with the percentage of time spent by certain employees on hardware and
software development for deployment in business operations. The decision
whether to capitalise and how to determine the period of economic benefit of a
development project requires an assessment of the commercial viability of the
project and the prospect of selling the project to new or existing customers.
Management determined budgeted sales growth based on historic performance and
its expectations of market development via each product set's underlying
pipeline.
A review of future cashflows for each of the product sets did not result in
any impairment.
Development expenditure has been capitalised on an ongoing basis and therefore
has a remaining useful economic life ranging from 0 to 5 years.
9 Property, plant and equipment
Plant and machinery Fixtures, fittings, tools and equipment Total
£'000 £'000 £'000
Cost
At 1 January 2021 315 348 663
Additions 37 13 50
Disposals (87) (49) (136)
At 31 December 2021 265 312 577
Additions 29 31 60
Disposals (39) (5) (44)
At 31 December 2022 255 338 593
Accumulated depreciation
At 1 January 2021 254 288 542
Charge for the year 36 41 77
Disposals (87) (49) (136)
At 31 December 2021 203 280 483
Charge for the year 41 19 60
Disposals (39) (5) (44)
At 31 December 2022 205 294 499
Net book value
At 31 December 2022 50 44 94
At 31 December 2021 62 32 94
At 1 January 2021 61 60 121
Depreciation expenditure of £60,000 (2021: £77,000) is included within
administrative expenses in the income statement.
10 IFRS 16 Right of use assets
Premises Motor vehicles Total £'000
£'000 £'000
Cost
At 1 January 2021 577 213 790
Additions - 76 76
At 31 December 2021 577 289 866
Additions - 59 59
Disposal (67) (38) (105)
At 31 December 2022 510 310 820
Accumulated depreciation
At 1 January 2021 230 81 311
Charge for the year 82 74 156
At 31 December 2021 312 155 467
Charge for the year 82 77 159
Disposal (67) (38) (105)
At 31 December 2022 327 194 521
Net book value
At 31 December 2022 183 116 299
At 1 January 2021 347 132 479
At 31 December 2021 265 134 399
Depreciation expenditure of £159,000 (2021: £156,000) is included within
administrative expenses in the income statement.
11 Cash and cash equivalents
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash at bank and in hand 4,461 3,903 - -
Less: bank overdraft (included within borrowings note 12)
(985) (1,388) (985) (1,388)
3,476 2,515 (985) (1,388)
The above balances are not offset in the Consolidated Statement of Financial
Position and are included for illustrative purposes only.
12 Borrowings
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Current borrowings:
Bank overdraft 985 1,388 985 1,388
Other loans - 30 - 30
985 1,418 985 1,418
The carrying amounts of borrowings approximate to their fair value due to
their short-term maturity, meaning that the impact of discounting is not
significant. The carrying amounts of the Group's borrowings are denominated
solely in sterling.
The Group bank overdraft facility is secured by a bond and floating charge
over the entire assets of the Group.
At 31 December 2022, the Group had total committed undrawn facilities of
£200,000 (2021: £200,000).
The Group now operates within a £200,000 net overdraft facility which takes
into account both the gross cash position of each Group entity netted off
against any borrowings. As at the 31 December 2022, this represents the net
cash balance of £3,476,000 (2020: £2,515,000) in Note 11.
The Company and its subsidiaries have given a guarantee in relation to the
overdraft facilities extended to the Group.
Other loans relate to the Coronavirus Business Interruption Loan repayable
monthly over six years; first payment commenced on the 12-month anniversary of
drawdown, July 2021.
The loan is guaranteed by the UK Government under the Coronavirus Business
Interruption Loan Scheme with interest payable monthly on commencement of loan
repayment. The rate of interest is 4.19% per annum above the Bank of England
floating rate. This loan was fully repaid during the year.
13 Leases
The note provides information for leases where the Group is a lessee.
i) Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
2022 2021
£'000 £'000
Right-of-use assets
Buildings 183 274
Vehicles 116 125
299 399
2022 2021
£'000 £'000
Lease liabilities
Current 157 169
Non-current 135 242
292 411
Under IFRS 16 the assets are now presented in property, plant and equipment
and the liabilities as part of the Group's borrowings.
Contractual undiscounted cash flows are due as follows:
2022 2021
£'000 £'000
Lease liabilities (undiscounted)
Not later than one year 165 171
Between one year and five years 150 240
315 411
There is not considered to be any significant liquidity risk by the Group in
respect of leases.
ii) Amounts recognised in the statement of profit or loss
2022 2021
£'000 £'000
Depreciation charge of right-of-use assets
Buildings 165 82
Vehicles 150 74
315 156
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